Rulemaking authority in N.C. — are rules legally as powerful as statutes?
What is the power of an agency rule? The longstanding canard is that a rule has the force of law, just like a statute. So, for example, rules can alter the common law:
Where an agency has the authority to act, its rules and regulations have the binding effect of statutes and may accordingly alter the common law. Taylor v. Superior Motor Co., 227 N.C. 365, 367, 42 S.E.2d 460, 461 (1947) (noting that “proper regulations authorized under the Act have the binding effect of law,” because such regulations “are the tools used to effectuate the policy and purposes of the Act.”)
In re Declaratory Ruling by NC Comm’r of Insurance Regarding 11 N.C.A.C. 12.0319, 134 N.C. App. 22, 30 (1999).
Similarly, the view has long and generally been that agencies are bound by their own rules, since the rules are, essentially, just like statutes. See, e.g., Snow v. Board of Architecture, 273 N.C. 559 (1968); 2 Am. Jur.2d Administrative Law § 350 (1962) (“Procedural rules are binding upon the agency which enacts them as well as upon the public of the agency, and the agency does not, as a general rule, have the discretion to waive, suspend, or disregard in a particular case a validly adopted rule so long as such rule remains in force.”).
But here’s another conundrum about rules: they don’t always get treated with the same legal respect as statutes, despite what some court opinions say, and what the Administrative Procedures Act seems to imply about them.
From the very definition of a rule, in the N.C. Administrative Procedures Act, it seems clear that rules can and do directly and substantially affect the rights of persons outside the agency. The definition is written with very broadly to cover almost every general pronouncement by a state agency:
“Rule” means any agency regulation, standard, or statement of general applicability that implements or interprets an enactment of the General Assembly or Congress or a regulation adopted by a federal agency or that describes the procedure or practice requirements of an agency. The term includes the establishment of a fee and the amendment or repeal of a prior rule.
G.S. 150B-2(8a). The definition then excludes a statement “[that] does not directly or substantially affect the procedural or substantive rights or duties of a person not employed by the agency or group of agencies,” G.S. 150B-2(8a)(a). By implication, a rule can directly and substantially affect the rights and duties of everyone outside the agency–another way of saying that it has the force of law, with the implied potential force of the State’s power standing behind it.
By the way, if the General Assembly directs an agency to “establish a program” and that program wishes to require everyone to follow a certain set of requirements to be eligible for the program, does the agency have to promulgate rules to do so? Yes, though some agencies apparently wish to view “establish a program” as legislative authority to skip the rulemaking.
But you barely have to scratch the surface of case law to find that courts do not always treat rules as the equivalents to statutes.
To begin, there is not and probably never will be an escape from the view (essentially a political view) of some judges (and probably most legislators) that agencies, not being elected, just can’t possibly be legitimately as powerful a legal force as the legislature. Courts often write things like: “Whatever force and effect a rule or regulation has is derived entirely from the statute under which it is enacted. Indeed, an administrative agency has no power to promulgate rules and regulations which alter or add to the law it was set up to administer or which have the effect of substantive law” Hall v. Toreros, II, Inc., 176 N.C. App. 309 (2006) (internal citation and quotation omitted), aff’d per curiam by an equally divided court, 363 N.C. 114 (2009) (cited not as precedent, but as evidence for the unstated hierarchy in the minds of many in which rules rank below statutes).
Toreros arose over a drunk driving death. A patron at a bar in Durham left his seat for awhile, also leaving his unfinished drink (the record is unclear on whether he exercised good bar etiquette by covering the drink with his napkin or coaster), walked outside, but returned later after “final call.” The bartender refused to serve the obviously drunk patron another round, but the patron finished his original drink and sampled some dregs from other glasses left on the bar. He then staggered out the door, drove away, and killed someone in a car accident.
There is an ABC rule prohibiting a licensee from allowing an intoxicated person to consume alcoholic beverages on the licensed premises. 4 N.C.A.C. 2S.0206 provides that “[n]o permittee or his employees shall allow an intoxicated person to consume alcoholic beverages on his licensed premises.” If one treats this rule as if it were a statute, it would (argued the plaintiffs) establish a standard of care that a judge or jury could use to test the decision of the bartender not to stop the drunk patron from further consumption.
But the court held that the rule did not impose a legal duty on the restaurant business to prevent an intoxicated patron from drinking the rest of his previously purchased drink or that of other customers. The Court looked at the stated purpose of G.S. Chapter 18B, authorizing the ABC commission rules, including the rule in question, and found no sense that the General Assembly intended direct regulation of the consumption of alcohol by persons at permitted establishments or of protecting the public from bar patrons. The case has a fairly detailed discussion of what the General Assembly did or didn’t consider in authorizing rulemaking.
Interestingly, our research reveals the Institute of Government (now School of Government) in 1966, acting at the request and under the direction of the State Board of Alcoholic Control, recommended the amendment of Chapter 18 (now Chapter 18B) to include prohibiting a licensee from “[p]ermit[ing] any intoxicated person to consume intoxicating liquor on the licensed premises,” a proposed revision “derived from State ABC Board Regulation No. 30.” Loeb, Ben F., Jr., Regulation of Intoxicating Liquors — A Proposed Revision of Chapter 18, General Statutes of North Carolina, pp. 143-44 (North Carolina Institute of Government, Dec. 1966). While it is unclear whether the Institute of Government recommendation ever came to the attention of the General Assembly, that body in any event enacted no such amendment when subsequently rewriting Chapter 18 in 1971 or at any later time.
176 N.C. App. at 320-21. The Toreros court declined to treat an administrative rule as a safety regulation having the force of a statute and therefore establishing a standard of care.
There are many such judicial expressions of the limited power of agencies in comparison to legislatures, harkening back to the early (1930s-1940s) debates over the federal Administrative Procedures Act and continued judicial concerns about legislative delegation and the scope of agency authority.
It’s not even always clear that rules must be consistently applied by agencies. There is law to the effect that an agency may determine that a rule as applied in a particular case is void. See, e.g., Good Hope Health System, LLC v. N.C. Dept. of Health and Human Services, 188 N.C. App. 68 (2008) (challenging certificate of need for Harnett County hospital).
The Good Hope court decided that G.S.150B-33(b) allows an agency to determine that a rule as applied in a particular case is void when the rule is not reasonably necessary in a particular case to enable the agency to fulfill its duty. The statute itself say an administrative law judge can “[d]etermine that a rule as applied in a particular case is void because (1) it is not within the statutory authority of the agency, (2) is not clear and unambiguous to persons it is intended to direct, guide, or assist, or (3) is not reasonably necessary to enable the agency to fulfill a duty delegated to it by the General Assembly.” G.S. 150B-33(b)(9)).
The Good Hope case has a complex factual and procedural background, but the basic question was: who gets to build a new hospital, and where: Erwin or Lillington? And does the winner of that contest get to deploy a CT scanner? The Court held that an agency could adopt a finding of an ALJ that a rule as applied in a particular case was void and ignore it. 188 N.C. App. at 81. This was on judicial review of a contested case; query whether language asserting that an agency itself has this power would get the same respect without an ALJ finding.
Then there are the cases that essentially proclaim “No harm no foul” when it comes to agencies not applying their rules. Consider Farlow v. N.C. State Board of Chiropractic Examiners, 76 N.C. App. 202 (1985) (action to determine whether appellant chiropractor engaged in unprofessional conduct).
The Board of Chiropractic Examiners suspended a chiropractor’s license after finding that he requested insurance information prior to seeing the patient and her two children, told the patient that she could collect $1,800 and he would receive $1,000, set up a plan of treatment extending over a period of six weeks, told the patient that the scheduled treatment would make the injuries look worse and that by the end of the following month the insurance company would be pushing for a settlement, did not ascertain where the passengers were situated in the vehicle that was involved in the collision, diagnosed symptoms which the patients never reported but which the chiropractor said “would appear in several days,” did not have positive x-rays when the treatment plan was formulated, had no positive findings from examinations or patients’ complaints upon which to base a long range treatment plan, and the patients’ complaints and findings upon examinations supported a diagnosis of simple or moderate muscle strain which would be self-limiting requiring minimal therapeutic utilization.
The Board suspended the chiropractor’s license under 21 N.C.A.C. 10.0301 (4) and (6) for dishonorable conduct. The rule was adopted under an old, repealed statute, which referred to dishonorable conduct. The new, revised statute, G.S. 90-154, referred to “unethical conduct” but did not mention “dishonorable conduct.” The Board did not readopt its regulation after the statute was rewritten. So there was a Board disciplinary determination based on a standard in a rule that no longer meshed perfectly with the statute that originally authorized it.
The Court of Appeals was not much bothered by this argument, or by the chiropractor’s claim for unconstitutional vagueness for the term “dishonorable conduct.” The regulation which requires that chiropractors not engage in dishonorable conduct is not unconstitutionally vague because “a chiropractor of ordinary intelligence would [not] have any difficulty telling that under the regulation prohibiting dishonorable conduct he was forbidden from prescribing treatment for patients which was not to treat their physical ailments but was to build up insurance claims.” 76 N.C. App. at 210.
However, the chiropractor also correctly alleged that the Board failed to issue its decision in a timely manner based on its own rules. This also did not bother the court:
The parties have not cited in their briefs and we have not found a North Carolina case which deals with the power of an administrative agency not to follow its own rules. There have been cases in the federal courts dealing with this question. We believe the rule from these cases is that a party has the right to require an administrative agency to follow its own rules if its failure to do so would result in a substantial chance that there would be a different result from what the result would be if the rule were followed. This insures that those who appear before a board will be treated equally. We believe this rationale is sound.
In this case the result was not changed because the Board did not follow its own rule. We do not believe it was prejudicial error for the Board not to do so. The appellant’s second assignment of error is overruled.
That is, “no harm, no foul.” 76 N.C. App. at 208 (emphasis added).
I conclude from this quick look at North Carolina’s version of the long debate over administrative agency power that
- Yes, rules in general do have the legal impact of statutes, but not always:
- Judges (like legislators) will forever resist this conclusion if they dislike the rule.
- If the outcome seems fair to a court, it will let an agency disregard its own rules.
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